Viva Energy to acquire Coles Express in a $300mn deal

Viva Energy to acquire Coles Express in a $300mn deal

SYDNEY, AUSTRALIA: Viva Energy Group Limited announced plans to create a leading integrated fuel and convenience business through agreement to acquire Coles Express’s retailing capability and infrastructure.

Viva Energy will acquire the retail convenience business operated by Coles Express for a headline consideration of $300M million, subject to customary adjustments at completion.

The consideration will be entirely funded out of existing cash reserves and available debt facilities. Viva Energy will maintain a strong balance sheet and prudent capital structure following completion;

It will result in an early conclusion of fuel and convenience Alliance Agreement with Coles Group.

This transaction will create the largest single branded Australian fuel and convenience network under a single retail operator, with 710 sites nationally, providing the platform for Viva Energy to accelerate plans to further grow its retail network and the fuel and convenience business.

By bringing together the two businesses now, rather than at the natural end of the Alliance in 2029, Viva Energy can more efficiently optimise the network and is in a better position to make the investments necessary to keep evolving the convenience offer at a point where sales are recovering and consumers are increasingly seeking greater convenience offers.
Together with its investment in the regionally focused Liberty Convenience network of 92 sites, the Company has a high quality national network of fuel and convenience stores located in metro, regional and on main transport routes, providing an advantaged position to serve the on-road and local suburban convenience markets.

The convenience market in Australia has achieved average annual growth of 3.1% in the last seven calendar years, while Coles Express convenience sales have risen 3.7% on average in the seven years to 30 June 20224.

The Company expects the convenience segment to continue to deliver strong growth potential over the long term driven by population growth, changes in mobility, and increased consumer demand for convenience led offers.

Demand for traditional fuels is also expected to remain strong well into the next decade, and the adoption of new energies such as battery and hydrogen electric vehicles will lead to growing demand for convenient on-road recharging and refuelling options, and therefore new convenience growth opportunities.

Coles Express will be transitioned and operated as an independent business unit within the Viva Energy Group.

The new business unit will bring together existing retail capability from both Coles Express and Viva Energy to establish a highly focussed and capable retailing organisation that will lead the Company’s broader fuel and convenience strategies.

Coles Express will support the transition of retail capability and infrastructure, and remain an important support partner through transitional arrangements, ongoing convenience supply chain services, and continuity of existing loyalty programs, including 4cpl discount dockets and Flybuys.

A Product Supply Agreement will
ensure that the retail business continues to have access to competitive and leading convenience offers from the Coles Group.

A team led by Megan Foster, Executive General Manager of the Viva Energy Retail business, has been established to work with Coles to manage the transition over the coming months.

The transaction is expected to be completed in the first half of 2023.

Viva Energy CEO and Managing Director, Scott Wyatt, said, “We have enjoyed a strong partnership with Coles over the last 20 years and this is an exciting next step for our business and our relationship.

The acquisition means we will be able to accelerate our plans to grow the integrated fuel and convenience business while our customers continue to enjoy the excellent customer service provided by the dedicated Express team, the extensive product range in-store and the loyalty programs we know they love.”

“Coles Express is a leading convenience retailer with considerable retail capability and experience.

The acquisition of this business, and the establishment of an integrated fuel and convenience business unit, will put the Company in a strong competitive position to leverage our high quality networks and pursue long term growth opportunities in the fuel and convenience sector.”

“We welcome around 6,000 Coles Express team members to the Viva Energy group and look forward to working with them to build exciting new fuel and convenience offers and consolidate our position as a leading retailer in Australia.

We will continue to work closely with Coles through the transition and beyond through an ongoing relationship.”

“We are thrilled to progress our strategic agenda and begin a rewarding journey with our partners, customers and team members.”

Coles CEO Steven Cain said, “This agreement is positive not only for Coles and Viva Energy, but also for our customers, team members and respective shareholders. Viva Energy is well placed to make the most of opportunities to grow the Express business into the future, while we will strengthen our focus on our omnichannel supermarket and liquor businesses and our ambition of becoming Australia’s most sustainable supermarket group.”

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